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Allison: Another View On IRS Scandal

Most reports about the developing Internal Revenue Service “scandal” paint a similar picture: The Cincinnati branch of this agency mismanaged its oversight of 501(c)(4) groups and its resulting actions were both inept (taking too much time to conduct examination) and inappropriate (targeting Tea Party related groups). To be clear, “501(c)”…

Most reports about the developing Internal Revenue Service “scandal” paint a similar picture: The Cincinnati branch of this agency mismanaged its oversight of 501(c)(4) groups and its resulting actions were both inept (taking too much time to conduct examination) and inappropriate (targeting Tea Party related groups).

To be clear, “501(c)” is the tax code section dealing with nonprofit organizations; while “(4)” is the subsection of groups that have come to national attention lately.

These (c)(4) groups are nonprofit organizations theoretically created to promote social welfare.

The IRS certainly appears to be guilty of inappropriately scrutinizing certain groups seeking 501(c)(4) status, flagging groups with “tea party” and “patriot” in their names. But shouldn’t the current controversy be pointing us in the direction of much bigger issues concerning the 501(c)(4) tax status?

The (c)(4) designation affords charity status to organizations – but allows these same organizations to engage in unlimited lobbying and plenty of political campaign activity as long as campaign activity is not the organization’s “primary purpose.” On paper, this means these groups must spend less than fifty percent of their money in politics. One of the most controversial standards is that these groups are not required to disclose their donors. Fittingly, one of the most prominent uses of 501(c)(4) money has been campaign advertising.

In light of recent events surrounding the IRS, we should be asking some serious questions. Do we want IRS agents deciding what groups are and are not primarily political? Doesn’t this unnecessarily involve the IRS in politics when we should be trying to keep it completely free from politics?

The line between permissible advocacy and too much political activity is hard to identify – and even harder to enforce. Personally, I believe charities should be charities and if a group so wishes to be a charity it should act in accordance with 501(c)(3) regulations. Organizations primarily involved in the political process should pay taxes and register as 527 organizations – groups which disclose their donors and file monetary reports.

The IRS scandal demonstrates that identifying and regulating political campaign activity is nearly impossible – raising the question of whether the IRS will ever be able to satisfactorily police the line at which political action becomes a group’s primary action? And more importantly whether it should be asked to police that line in the first place?

The White House, along with Congress, should decide what steps to take next on this issue – whether creating clearer and stricter lines that instruct the IRS’s scrutiny on these groups or to eliminate the 501(c)(4) status altogether. Yes, those responsible for mistakes made at the IRS should be held accountable; but there are fundamental concerns that need to be addressed so that these mistakes will not be made again.

Morgan Allison is a recent graduate of Erskine College in Due West, South Carolina. Follow her on Twitter @m_allison6.

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6 comments

A Friend May 27, 2013 at 11:33 am

Good article. I am a proponent of getting rid of these 501(c)(4) orgs all together b/c I just don’t think the IRS can “satisfactorily police the line at which political action becomes a group’s primary action.”

Reply
So May 28, 2013 at 9:44 am

I agree. Too many political groups use this as a loophole to not pay taxes. It needs to end. Eliminating that designation is the way to go.

Reply
A Friend May 27, 2013 at 11:33 am

Good article. I am a proponent of getting rid of these 501(c)(4) orgs all together b/c I just don’t think the IRS can “satisfactorily police the line at which political action becomes a group’s primary action.”

Reply
So May 28, 2013 at 9:44 am

I agree. Too many political groups use this as a loophole to not pay taxes. It needs to end. Eliminating that designation is the way to go.

Reply
cuvinny May 27, 2013 at 1:45 pm

Good point, much like Rand Paul’s drone grandstanding Republicans misses the real problem. All political action groups posing as a charity should be scrutinized.

Reply
cuvinny May 27, 2013 at 1:45 pm

Good point, much like Rand Paul’s drone grandstanding Republicans misses the real problem. All political action groups posing as a charity should be scrutinized.

Reply

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